Question
1.5 The Department of Public Works has set a budget limit of R2 billion for infrastructure development in Limpopo, but the amount is expected to increase to R2,5 billion when considering inflation: a) Expenditure ceiling b) Real expenditure c) Government spending d) Government final consumption spending e) Government investment
Ask by Hampton Kelley. in South Africa
Nov 23,2024
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Answer
The budget limit of R2 billion is an **expenditure ceiling**.
Solution
In the context of the information provided, the most appropriate term to describe the budget limit of R2 billion for infrastructure development, which is expected to increase to R2.5 billion when considering inflation, would be:
**a) Expenditure ceiling**
The expenditure ceiling refers to the maximum amount that can be spent, which in this case is initially set at R2 billion. The mention of an increase to R2.5 billion due to inflation indicates a consideration of future costs, but the term "expenditure ceiling" best fits the description of the budget limit itself.
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In the context of budget management, it's essential to recognize how expenditure ceilings are established to control overspending while ensuring that critical infrastructure needs are met. The R2 billion limit acts as a safeguard to maintain fiscal discipline within the government's development projects. As the budget projection is likely to rise to R2.5 billion due to inflation, it’s important to understand actual versus nominal values. Real expenditure adjusts for inflation, allowing for a more accurate analysis of spending power and resource allocation over time—an essential tactic in strategic financial planning.
